Equities market to absorb expected N2.14trn maturities from fixed income space

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5 years ago

GIVEN the Central Bank of Nigeria’s (CBN) policy preventing assets managers and other high networth individuals from investing in the Open Market Operation (OMO) space, there are strong indications that about N2.14 trillion worth of OMO bills expected to mature in October and November would find investment destinations in the equities market.

Meanwhile, in the new week, Treasury-bills worth N490.46 billion will mature via the primary and the secondary markets which will outweigh T-bills worth N154.37 billion to be auctioned by CBN via the primary market; viz: 91-day bills worth N49.84 billion, 182-day bills worth N10.62 billion and 364-day bills worth N93.92 billion dealers revealed.

Domestic investors according to dealers from Cowry Assets Management Limited patronised the equities market more last week given the ridiculously low fixed income yields and the net matured OMO bills in September 2020 worth N1 trillion.

Of the above, N1.30 trillion matured via OMO as against N310 billion which was auctioned, more of which were not reinvested in OMO space given the CBN’s restriction policy.

“We feel that the rise in the equities index would be sustained going forward, especially for the month of October and November 2020, partly driven by N2.14 trillion worth of OMO bills expected to mature in those months.

“However, we expect some moderation in share prices in the month of December 2020 as investors take profit on equity investments to take care of expenses ahead of the festive season,” the firm’s analysts stated in a note to clients.

As of October 2020, the domestic equities market index had printed a 6.43 per cent gain.

Hence, “we advise investors to watch out for buy opportunities in December and take position ahead of the corporate actions that would commence in the first quarter of 2021 amid relatively attractive dividend yields.

“The equities market is currently bullish as share prices has moved upward, thus, by buying at the current prices, new investors may be doing so at the risk of buying at relative high share prices which may impact negatively on investors capital if prices reverse in the short term,” Cowry Assets Management Limited emphasized in the note.

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